Riyadh extends Srak drilling deadline for Empty Quarter

11 April 2008
Exploration company is granted 18-month extension to complete programme.

The South Rub al-Khali (Srak) exploration company has received a crucial 18-month extension from the Petroleum & Mineral Resources Ministry, which will allow it to complete its seven-well drilling programme in the Empty Quarter.

It is understood to be the only extension granted to date. Similar requests have been made by Sino Saudi Gas, a joint venture of China’s Sinopec and Saudi Aramco; and EniRepSa, which includes Italy’s Eni, Spain’s Repsol and Aramco (MEED 16:11:07).

The exploration programme is seen as an important element in Saudi plans to develop its gas resources, which in turn will allow greater industrial diversification of the economy.

Srak, a 50:50 joint venture of Saudi Aramco and the UK/Dutch Shell Group, asked Riyadh for more time to drill in August 2007, blaming terrorist activities in the kingdom in 2004 for putting its exploration activities behind schedule (MEED 24:8:07).

Under the terms of the original agreement, Srak’s contract with the ministry was due to expire in January 2009. However, because progress has been slower than expected, only four wells from the seven-well commitment were likely to be completed before the venture was wound up.

One executive close to the drilling venture tells MEED the consortium recently received approval from the ministry for an additional exploration period until mid-2010.

“The extension is gratifying for everyone involved,” he says. “It gives the best chance for the venture to find hydrocarbons in what is an enormous land area. It will allow all seven wells to be drilled, which is what was wanted.”

It is not clear whether Sino Saudi Gas and EniRepSa will receive similar approval.

“The others have separate agreements and I do not think this will automatically allow them to gain more time as well,” he says.

The ministry has been concerned about the lack of success on the exploration programme in the Empty Quarter. It had initially suggested that the consortiums could collectively produce up to 2 billion cubic feet a day (cf/d) of gas by 2011.

The kingdom suffered a spate of terror attacks in May 2004 during which 19 foreigners were killed. Western oil majors including Shell were forced to relocate some of their Saudi staff.

The fourth joint venture in the Empty Quarter, of Aramco and Russia’s Lukoil, remains on schedule, according to one executive invol-ved in the project, and does not anticipate needing additional time.

Srak began drilling its fourth exploratory well, named Kidan 6, on 29 February in contract area 1 near the remote Shaybah oil field.

The well is expected to be drilled to nearly 18,000 feet, with significant amounts of sour gas expected to make it a challenge to develop.

Srak suffered a setback in February after France’s Total, which originally held a 30 per cent stake in the venture, cut its involvement because of the lack of any sizeable discoveries (MEED 7:2:08).

Total said it would not incur any penalty as the original agreement allowed shareholders to exit the contract if three wells were dry or non-commercial. Shell and Aramco have since split Total’s stake to become 50:50 shareholders in the venture (MEED 2:11:07).

Sino Saudi Gas and EniRepSa were unavailable for comment.

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